It depends whether the fair market value of the house at the time of transfer was less or more than what your parents paid plus any improvements they made while living there.
If the FMV of the property at the time your parents made the gift is less than their adjusted basis, your adjusted basis depends on whether you sold for a gain or loss.
Your basis for figuring a gain is the same as your parent’s adjusted basis, plus or minus any required adjustments to basis while you held the property.
Your basis for figuring a loss is the FMV of the property at the time your parent's made the gift, plus or minus any required adjustments to basis while you held the property.
Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.
If the FMV of the property at the time your parents made the gift is equal to or greater than your parent’s adjusted basis, your basis is the your parent’s adjusted basis just before your parent’s made the gift.
If your parents paid a gift tax, add the gift tax paid on the net increase in value.
What is the basis of property received as a gift?
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